Is 2023 the year to buy an electric vehicle?

Sascha: [00:00:02] From Equity Mates media. This is The Dive. I'm your host, Sascha Kelly. A price war is brewing in the electric vehicle market. While prices of EVs remain significantly more expensive than cars and trucks with traditional engines, prices are starting to come down. With a flurry of new competitors entering the market, Some of the established players are dropping their prices to attract more buyers. It's Monday, the 6th of February. And today I want to know are we going to see an EV price war? And who is currently leading the competition to do this? Today, I'm joined by my colleague here at Equity Mates Media. It's Darcy Cordell. Darcy, welcome to The Dive. 

Darcy: [00:00:47] Hi, Sascha. Thank you. 

Sascha: [00:00:48] Now, I know neither of us have electric vehicles. I'm right in saying that. 

Darcy: [00:00:53] You're absolutely right. 

Sascha: [00:00:55] I'm desperately want one, though. And I saw Mercedes has just released one. I was all over my Instagram this morning, so I'm really excited to kind of dig into this topic today. 

Darcy: [00:01:04] There's some super cool options out there, Sascha. We'll chat about them. 

Sascha: [00:01:09] So here's a great place to start. The four best selling EVs in the U.S., they all had their prices slashed recently.

Darcy: [00:01:17] Yeah, they did. So Tesla is the largest ever seller in the US. No surprises there. But they recently slashed prices on some of their models by 20% and this has come after Tesla has cut its prices in China for a second time in the past couple of months.

Sascha: [00:01:34] Okay. Who is this? Some of the other competition dropping their prices. 

Darcy: [00:01:37] So Ford followed suit in the US. They announced price cuts on their Mustang Mach, A SUVs. The average price dropped by four and a half thousand dollars.

Sascha: [00:01:47] What am I looking at? Looking at if I wanted to buy one here in Melbourne. Tesla Model three is now one of Australia's most popular new cars. 

Darcy: [00:01:56] So Tesla cars in Australia have been reduced by between 1600 at about 3900, depending on the model. Although the delivery fees have increased from $25 to 1400 and the order fee has increased by $50 to $400. 

Sascha: [00:02:12] Someone buying one of the models that that's decreased by 1600. I've got a cheaper car on the lot for getting it. To me, it's going to be just the same price.

Darcy: [00:02:20] Yeah, you're going to have to fork out some cash. 

Sascha: [00:02:22] So what is actually driving these changes? Is it to try and get more people to buy them or has the cost of making the cars decreased? 

Darcy: [00:02:31] Yeah, good question. There are a couple of factors at play here. China's EV market is getting very crowded. 

Audio Clip: [00:02:36] Bhiwadi is now right up there with the world's largest RV makers with Tesla. There's been a lot of speculation about they did in Australia. There has Been some delays with this out of the three landing in this market, but it's finally here. 

Darcy: [00:02:48] And there are a lot of other competitors offering lower prices than Tesla. So that's been a factor in Tesla lowering its prices in China. But over in the US there have been new subsidies that have come into place on purchasing electric vehicles. Sascha This story is actually just developed. Tesla has just raised the price of its model Y SUV by about 1500 dollars because the Biden government has just changed the tax credit so that it now includes electric vehicles up to $80,000 rather than $55,000. So now that Tesla Model Y will be worth about $56,000 just above that previous limit. 

Sascha: [00:03:24] Interesting you did mention that there's a number of factors. Are there any that you've left off the list?

Darcy: [00:03:30] Yeah, I think the wider one is that we do have a potential recession looming. You say that ever in the news and consumers might be unable or less willing to pay the current prices. So for those makers that can afford to bring prices down, that might help them make up for less demand. And it's also important to acknowledge that prices of EVs did rise quite heavily last year because of a shortage in chips. There was rising cost of battery materials and also high petrol prices that drove demand for EVs, and some of those pressures are now starting to ease.

Sascha: [00:03:59] Yeah, I heard that during Tesla's earnings call recently, Musk said a recession could lead to quite meaningful decreases and, quote, in almost all of its input costs. So the cost of making the car could also just be less. 

Audio Clip: [00:04:13] But basically price really matters. I think there's just a vast number of people that want to buy a Tesla car but can't afford it. And so these price changes really make a difference. 

Darcy: [00:04:24] Yeah, and we love to say that as buyers, there's probably another reason too, which is back gaining market share with a bunch of new competitors entering the market. So Tesla and for their established players, they want to price these new competitors out of the market. The new competitors will find it hard to compete if the prices are lower and they won't be able to build a market share.

Sascha: [00:04:43] So Tesla and Ford have cut prices. Darcy But it's not really a war. If there's just two vying for the lowest prices, there's many other auto manufacturers out there. Have any of the others come forward and said that they're going to be cutting the sticker price as well? 

Darcy: [00:04:59] Yeah, we're not. Quite at that stage yet. General Motors CEO Mary Barra said last week in an earnings call that right now GM thinks they're priced where they need to be. They're going to monitor the situation and make sure they remain competitive. Volkswagen also came out and said it's very happy with its current EV pricing. And Hyundai and Kia both said that they won't change their prices. So at this stage, it's not quite over yet. 

Sascha: [00:05:22] Okay. So that's commentary from Hyundai, Kia, Volkswagen and General Motors. But that's not everyone. Darcy, are there new developments on the horizon aside from those big names?

Darcy: [00:05:34] Definitely. 2023 is going to be a massive year for electric vehicle assets. We're hearing that there will be about 50 new models of electric vehicles added to the market this year. Some of those are small volume entries from start ups and others are things like electric vans, but most are aimed at retail buyers. GM and BMW, they're big players again, but they're planning to launch dozens more electric vehicles by 2025, just between the two of them. So it might not be a bad idea as a shopper to wait and see what happens at the end of this year and see if the prices really do come down across the market. 

Sascha: [00:06:07] And if the cost of buying a new TV is way too much for you. There's good news as well for people who buy second hand cars as in the second hand market. For the first time since November 2021, the average used eBay is down below 50,000. I mean, it's still a significant amount of money, but it's great to hear that it's decreasing. So it's now around 48,700. So prices are really shifting. 

Darcy: [00:06:32] Yeah. Interesting one on used EVs, Sascha. Sometimes they would be selling for higher prices than new waves because the wait time for a new electric vehicle was sometimes up to nine months or a year. So people were like, I want to get my hands on a used one now. 

Audio Clip: [00:06:46] Extraordinary car. Wait times have been blamed on a shortage of.

Sascha: [00:06:49] I mean, so many things went bonkers during the pandemic. But I do remember the cars being an area of particular difficulty. I had a few friends trying to buy a new car or a used car or just a car and found it really, really tricky. So great news for us as consumers, especially if we're in the market to buy an electric vehicle in the near future. I know that they're not necessarily selling for the same price, but it's so great to see that there's so much interest. And if they're cheaper, hopefully more people are buying electric vehicles. So this is going to be good news as an investor, right? 

Darcy: [00:07:24] Yes. So great news in terms of the demand side. But investors do worry about some of the price cuts. And the reason is, along with a lot of new EVs coming to the market this year, a potential price war might cause prices to spiral lower and that actually impacts the profitability of these car makers. So Tesla, for example, they have the best margins in the industry, but as they lower their prices, that cuts into those margins and investors don't really want to see that. Having said that, though, Sascha, this year alone, Tesla stock is up 75% in just over a month. And it's good news for other RV makers, too. GM is up 21%. Bhiwadi The Chinese make up 13%, Ford up 13%, Volkswagen up 10%. It's good news, but I will caveat it is hard to find a stock that isn't up. So far this year. It's been an amazing start to the year for the US market especially. 

Sascha: [00:08:16] Yeah. When you said Tesla was up 75%, I was like, Dorthy, I think there's a couple more factors than just the cars when it comes to the stock price, you know, Elon being one of them, just the walking headline that he is. But I've got a sense of the potential price war that's brewing. I mean, really interesting to see as someone who follows business news. So talk a little bit more about the adoption curve of eBay's and which producers are successfully capturing this market. But first, let's have a quick break. Welcome back to the Dive. I'm your host, Sascha Kelly. I'm joined by my colleague Darcy Codell. Today we're talking about electric vehicles. Just before we get straight back into it, if you could do us a massive favour, jump on your podcast app, give us a five star review. Right. Some really, really lovely words. It's a really small, simple task from you, but it really does make a massive difference getting us in front of other ears and other people out there who might also want to know about electric vehicles. So Darcy, let's get straight back into what where are we in terms of EV adoption? How many people are actually practically looking at an electric vehicle as their next car already have one? I know that's a big question. So let's go by geography and let's start with the US. 

Audio Clip: [00:09:42] Delivering remarks at the Detroit Auto Show. The president Announcing $900 million in funding for the Construction of electric vehicle chargers. 

Darcy: [00:09:50] Last year. Electric vehicles made up 10% of all new car sales in the US. Not a bad number, but overall, about 5% of cars on the road are electric in the States and Joe Biden's government has set a goal for half of all new vehicles sold in the US to be electric by 2030. Pretty ambitious in terms of the plans that dominate it's Tesla once again. They dominate EV sales in the US thus.

Audio Clip: [00:10:13] Far in January, where we've seen the strongest orders yet to date than ever in our history. We currently are seeing orders at almost twice the rate of production.

Darcy: [00:10:24] In 2021. Tesla had 72% of the market share of EVs sold. They sold nearly 500,000 vehicles, but that market share is actually falling a little bit. Last year it fell to 65% from 72% the year before, but it did sell a lot more cars. It's just that more people are buying electric vehicles overall. A good start for you here. Tesla's Gigafactory in Austin, Texas, has the capacity to build 500,000 vehicles a year, but last year it only produced 93,000. 

Sascha: [00:10:54] Wow. So it hasn't quite got into the full scope of what it's capable of. So let's talk about China, because BYD is right up there with Tesla as the biggest EV maker in the world.

Darcy: [00:11:05] Yeah, it is. And China is officially the biggest market for EVs in the world. Now, about 14% of all cars in China are electric, and last year, 22% of all new cars sold were fully electric. Wow. And BYD sold about a million electric vehicles last year. But they do have a lot of hybrid model cars, which combine the power of a petrol engine with the efficiency of an electric motor. It's a combination of the two.

Sascha: [00:11:29] So it's not as cut and dry as you know, these are all electric cars, these are all traditional motor cars. They have a lot still operating in that kind of either oil space. 

Darcy: [00:11:38] Yeah, that's right. So there's a bit of a grey area here with some people say it is the biggest maker. I would say now it's still Tesla because they're pure EVs, but the way it is right up there. Another player in China is SAIC Motors, which is actually China's biggest car maker, but they sold hundreds of thousands of electric vehicles last year. So they're getting right into the market to.

Sascha: [00:12:00] Wow. So 22% of all new cars sold being electric in China. But some parts of Europe have an even higher percentage of EV share than that. 

Darcy: [00:12:10] It's pretty incredible. Across Europe, already, 22% of vehicles are electric. 

Sascha: [00:12:15] Europe's green transition has moved into the fast lane and this could be the future of the European auto industry. 100% electric. Wow. So that's not new cars. That's actually all cars on the road. 

Darcy: [00:12:26] Yeah, on the road. And there are a bunch of incentives and laws being put in place throughout Europe and the UK to encourage that uptake. For example, sales of new petrol and diesel cars will be completely banned in the UK by 2030 and by that year 2030, Europe is expected to have almost 70% of all vehicles electric, which is pretty wild, saying it's 22% now and that's just seven years away. 

Sascha: [00:12:49] So Tesla is super popular in the US, but does that translate across the Atlantic? 

Darcy: [00:12:55] It does. They reign supreme. They've still got the two most popular EVs in Europe, but there are a lot of other options coming out Fiat Piaggio, Volkswagen, Keogh and Skoda, they all have electric vehicle models in the top ten best sellers across Europe. 

Sascha: [00:13:10] So, Darcy, the kind of uncomfortable truth is that if I look around, I do see a lot more Teslas on the road now, but definitely not as many as the stats that I'm hearing globally. We must be lagging behind, right? [00:13:23][13.0]

Darcy: [00:13:23] Yeah, Australia is lagging behind. Just 3.4% of new car sales last year were electric and the global average was 8.6%, so we're a fair way behind. But it is changing quite quickly. As you said, you've seen a lot of Teslas around and that's not surprising because the Tesla model three just ended the Toyota Camry, 28 year winning streak as Australia's top selling mid-size sedan. And three out of every five electric vehicle purchases in Australia are Teslas. Wow. Yeah. We're also seeing a bunch of. You incentives to buy here. The State Government in New South Wales said it will remove stamp duty for any aways under $78,000 until they make up at least 30% of new car sales. And the asset also has a target of about 80 or 90% of all cars electric by 2030. 

Sascha: [00:14:12] Darcy There's incentives are great, but it's still a massive chunk of change. And I know that when I'm being really budget conscious at the moment and really watching all my toys, 70,000 feels like a lot to be putting out on a car. 

Darcy: [00:14:24] Yeah, it's not cheap, but if you think about it, petrol is expensive at the moment and over time you might get your money back. 

Sascha: [00:14:31] Yeah, very true. And I can always drive it as a new budget to make that extra coin up. So final thoughts, Darcy? Are we actually going to see a price war? All the ingredients are there. Is that what the horizon looks like? 

Darcy: [00:14:44] I think a price war is a strong word. I don't think we'll quite get to that. But we are going to see prices come down. Tesla and Ford slashing their prices is significant, but they're only two players. And as we said, their prices did rise last year when supply constraints were affecting their delivery. But if prices do come down, it's going to be a great thing for us buyers. And realistically, they should come down in the years ahead. As the share of EVs becomes bigger, there are more competitors entering the market and production just becomes more efficient. As an investor, maybe not the best news, but we always love seeing demand. So I think things are looking good. If you're an average purchaser. 

Sascha: [00:15:22] I think the takeaway stat for me is just 3.4% of new car sales in Australia being electric. I think we've got a lot of work to do to catch up to our global counterparts, but definitely interesting to hear what the scene is like all around the world. Darcy We might leave it there for today. If you want to keep the conversation going, then come and follow us on Instagram. Where @thedivebusinessnews. You can always contact us by email thedive@equitymates.com. Or just hit, follow and subscribe wherever you're listening right now and then you'll never miss an episode. Thanks so much for joining us today. And thanks, Darcy. 

Darcy: [00:15:57] Thanks, Sascha. 

Sascha: [00:15:58] Until next time.